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Nightly Business Report

News/Business. (2012) Fiscal cliff; Hostess Brands seeks permission to liquidate; Affordable Care Act. New. (CC) (Stereo)

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Sears 5, Calvert 5, Us 5, Washington 4, New York 4, Chicago 4, S&p 3, Baker 3, Debra Borchardt 2, Diane Eastabrook 2, Suzanne Pratt 2, U.s. 2, Erika Miller 2, Tyson 2, Lowe 2, Intel 2, Megan Mcgrath 1, Papa Johns 1, Bill Mcnabb 1, Darren Gersh 1,
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  PBS    Nightly Business Report    News/Business.  (2012) Fiscal cliff; Hostess Brands seeks  
   permission to liquidate; Affordable Care Act. New. (CC)...  

    November 19, 2012
    6:30 - 7:00pm PST  

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>> this is n.b.r. >> susie: good evening everyone. i'm susie gharib. stocks skyrocket on wall street. investors go from high anxiety about the fiscal cliff, to high hopes about a deal. >> tom: i'm tom hudson. good news on the home front. home sales, and prices move higher. can housing help pick up the pace of the economy? >> susie: and with more stores opening on thanksgiving than ever before, will more shopping hours add up to bigger profits? >> tom: that and more tonight on "n.b.r."! >> susie: "optimism" was the word of the day here on wall street. investors were feeling encouraged that fiscal cliff negotiations in washington are making progress.
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that led to a powerful rally today, continuing the momentum from friday after that white house meeting between president obama, and congressional leaders. stocks rallied right from the opening bell: the dow surged 207 points, the nasdaq jumped nearly 63, and the s&p 500 rose 27. >> tom: those hopes about a fiscal cliff deal may be good enough for stock traders today, but is the economy in a position to deal with whatever solution politicians may hammer out? it's expected that the fiscal fix will involve tax hikes of some sort, and spending cuts as well. we spoke with economist dean baker from the center for economic and policy research, and economist douglas holtz- eakin of the american action forum. "n.b.r.'s" washington bureau chief darren gersh began the discussion by asking baker what tighter federal policy will mean for the economy in the coming year. >> insofar as we get austerity, we get tax increases, spending cuts, that's going to slow the economy. i anticipate a deal so we are don't see the full, you know, $500 billion tax
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increases 100 billion spending cuts but whatever we do see in tax increases, spending cuts will be a drag on growth which is really not what we would see. if i had my choice we would have more stimulus, more tax cuts, more spending, boost the economy. >> are we headed for european-style like austerity,. >> we shouldn't have to be. what we should be doing is fix the long-term debt problem. and that should happen in the spring. between now and the spring we have to get through the end of the year threat which would cause a recession in my view. and so let's not do more tax increases. let's not dot big spending cuts. let's continue current policy, get to the spring intact and solve the debt problem. that doesn't mean you cut national security, basic infrastructure, education, research. those are core functions of government. you fix the big entitlement programs which the source of the exploding debt and you do a tax reform to grow as quickly as possible. >> i'm hearing some people say that maybe we get a deal where we phase out the payroll tax cut going away or we, that the president
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might want some kind of jobs program. do you think that's possible and how big could it be for next year. >> i think it's possible that we would see a bit of both. we would see something by way of either an extension of at least part of the payroll tax cut or some equivalent tax cut to boost the economy. because i think there is a lot of support by the republicans tos would the economy some measure. jobs program might be harder so with the republicans. but perhaps extending unemployment which is an important thing. >> could republicans take a jobs program or stimulus, whatever you want to call continuation a program to help the economy and would that make sense? >> if we got a good deal on the fiscal cliff and we didn't dot irrational thing and go over it, that in and of itself could help the business confidence. second is that the more you try to cram not lame duck the more dangerous it gets. but if we don't do something, you don't think if we do a minideal that gets us to a larger deal next year, you don't think that will rep ardize the economy? >> i think if we can do as little as possible, they will already raise some tax.
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the payroll tax holiday may very well go away. so no more. i think the economy can get through that be, it's not good news but it's not the end of the world and then you need a deal in the spring. >> dow agree with that? >> well, i think that we will see slowing, yachlt i mean that will be a drag on the economy but the story of the recession going over the fiscal cliff is one where those tax increases and spending cuts stay in place through the year. >> just very quick prediction. do you think they'll come up with a package and how big will it be, 2 trillion, three and a half, 3 trillion. >> i don't think-- i think they'll separate the issues. i think we'll have something done on getting over this fiscal cliff and then they'll talk about a package. >> i think they will not go over the fiscal cliff, probability .7, not one. and they will sketch out a framework for dealing with spring. it is too much work. >> i thought we would solve this all before thanksgiving, but i can see maybe why they will need more time. i want to thank our economists doug holtz-eakin and dean baker.
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have a good holiday. >> you too. >> susie: our next guest tells investors not to make rash moves in their portfolios, based on guesses about how the fiscal cliff negotiations play out. he's william mcnabb, c.e.o. of vanguard, the nation's largest mutual fund company. so bill, i heard that conversation. i know you've been worried about the fiscal cliff situation. did you feel a little more hopeful today? >> well, i did. and i'm very much in the camp of the two economists who were just on that what need its to happen is a short term deal to get us past year end. and i would like to see it tied to a time frame to strike a longer-term deal that deals with the nation's fiscal situation on a long-term basis. and i think that's what the markets are actually anticipating. >> suzanne: meanwhile-- . >> susie: meanwhile investors think the clock is tick and they don't want to wait to see what happens. they are worried about the tax implication of whatever deal does come out of washington. what are you telling investors to do?
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>> i think the age-old and very important philosophy, if you will, is to stay highly diversified. it's very difficult to anticipate, you know, where tax rates are going to end up or, you know, which sector is going to get favored over another. and i think the best defense against that is to have a highly diverse fight portfolio of stocks and bonds and stick with that allocation. >> susie: a lot of people are just trying to find a safe place to put their money so unies have become popular, a lot of people into treasuries, cash, of course. what do you tell people when you hear them talk about these investments? >> well, again, you know, for me it always comes down to what is their time frame. so if somebody has an immediate need or a short term need where they know they're going to need capital then you want to be in a safe vehicle like, you know, a short-term municipal bond fund or treasury fund, that is short term in duration. but if you are talking about planning for long-term,
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retirement or a child's education 10 or 15 years down the road. then you have to have a much more robust allocation and take some risk and put money into equities and you know, again over the long run that is how are you going to get rewarded. >> susie: a lot of people are nervous about putting their money into the stock market. not just now but it's been like this for a while. what do you think it will take to get individual investors to feel comfortable about investing in stocks again? >> yeah, i think it's a real crisis of confidence, if you will, more than anything else. and what you are seeing is, you know, with all the uncertainty and some of the volatility that that uncertainty creates, it's made people nervous. you know, when you look at the numbers, if you look at stocks over the last ten years, the returns actually pretty good. and you know, people who have been invested for the last ten years have actually earned a reasonable return, between 6 and 7% per year. and so what you are seeing in terms of people staying
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out of the markets is really a reflection of the uncertainty that we see around the economy and the volatility that that cause the markets. causes in the markets. >> well, that uncertainty has become the watchword for everybody these days. thank you so much bill for coming on the program. bill mcnabb, c.e.o. of vanguard. >> reporter: i'm erika miller in new york. after the thanksgiving meal, many people will be heading to the malls. we'll look at whether opening stores on the holiday, makes good business sense to open on thanksgiving. >> tom: we saw more evidence today of an improving national housing market. of course, real estate is local, but measured as a nation, sales and prices are picking up. existing home sales rose 10.9% in october compared to a year earlier. that was stronger than expected. it's the 16th straight month of year-over-year gains. median prices were also up, climbing to $178,600. all this as home sales ticking up, number of homes on the market going down,
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dropped to just over 2.1 million homes last month, the fewest number of existing homes on the market for sale in almost a dekachlted megan mcgrath knows this data well. with us tonight at the naz. megan, first of all, does the relatively few number of homes threaten any pickup in housing? >>. >> well, it's an interesting dynamic we're seeing now. we're hearing from realtors is that they think that sales are actually depressed a little bit because of this lack of inventory. that buyers are getting frustrated that they are not finding enough homes in the market so we actually think it could be depressing sales a little bit testimony should be helping prices. and hopefully that will bring more inventory on to the market over time. but we're in a little friction in the market. we're not seeing folks bring their homes into the market because we're at the bottom. >> would you describe this as a buyers market for residential real estate or sellers? >> it depends a little bit on the region but overall it is definitely turning into a sellers market at this
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point. >> tom: more pricing power. what about for new homes. we saw today also that builders sentiment continues to increase. those home builders are an optimistic bunch to begin with you, you have to when you are putting shovels in the ground. up 7 months in a row, this chart going back better than six years, we're at a six year high. what about this builder sentiment and are we at any risk of overbuilding? >> no, we're not at a risk of overbuilding yet. the sentiment number was 46. so we still have more builders telling us that things are weak versus strong. that would be-- that point is 50. so we're still relatively weak. but we're up a lot versus last year. i think last year the number was 19. so we've seen a significant increase in builder sentiment. and october seems to have been better than expected. so things are humming along. but inventory in the new-home sales market is also low, also below six months of supply. >> right. >> so we've got builders being rational still at this point. >> our last half minute and i do want to talk about the
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home building stock sector as witness this exchange traded fund, has had a nice rally but sold off with the rest of the market. real quick what is your outlook? >> yeah, we're relatively neutral on home builders right now. they've had a good rally over the past year. we're a little bit concerned about things like input costs and certainly about what is going on in washington like your previous-- said. so we're a little neutral right now. we would wait and see, we think the stocks had will be flat over the next 3 to 6 months. >> do you have a position in that home builders etf? >> we do not. >> tom: megan mcgrath, analyst with mkm partners.
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>> susie: as the holiday shopping season officially gets underway, all this week on "n.b.r." we're looking at holiday retailing. tonight, the earlier-than-ever store openings on thanksgiving day. for years now, retailers have been chipping away at the taboo of opening on thanksgiving. but is that extra shopping day a smart business strategy or simply a gimmick? erika miller reports. >> reporter: for the first time, sears will join a slew of other retail chains in opening stores on thanksgiving day. so you may wonder if the holiday will soon be nicknamed black thursday. like other stores, sears will be offering its best deals of the year. >> we have a 32" tv for $97. i've never ever heard of a 32" tv going for $97. >> reporter: sears, walmart and toys r us will open their doors at 8 pm. target opens an hour later. macy's, kohls and best will wait until midnight. kmart's opening is the earliest: 6 am.
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the stores say they're simply meeting the needs of their customers. >> think about thanksgiving. and right after you have thanksgiving dinner, you are with the whole family. you could just come with the whole family and shop. sears is a family store. >> reporter: but not everyone is happy about the early openings. at change.org, there are petitions fighting the trend-- some with hundreds of thousands of signatures. they argue opening on thursday is not necessary, because it simply steals business from other days. retail expert brian sozzi disagrees. >> i think it's very important now. when you have people looking for the best deals on their mobile phones, their ipads, online; you need to give the customer a reason to get in the store as soon as possible. >> you can't blame retailers for trying to get a jumpstart on sales, given the stiff competition for shopper dollars. stores also have to compete with online retailers, many of which are always open. plus, early store openings extend the crucial holiday season by a day: >> it's going to be the way of the future going forward.
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retailers are, for the most, part publicly traded companies. and they owe it to their shareholders to drive as many profits and sales when they can as humanly possible. it's their biggest season. >> reporter: and that's why stores like sears will now be open thanksgiving, hoping holiday traditions will now include a trip to the mall. erika miller, "nightly business report," new york. >> susie: intel c.e.o. paul ottelini is retiring in may of next year, a few years earlier than expected. intel said today it will consider candidates from inside and outside of the company. and, as suzanne pratt reports the management change comes as the chipmaker grapples with weak
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demand for personal computers. >> reporter: paul otellini has spent four decades at intel, eight of those years in the corner office. and it has been during his tenure at the top that the industry has shifted toward mobile computing and away from pcs. the problem for intel is that its chips are mostly used in computers, not in the increasingly more popular smartphones and tablets. >> ottelini was seen i think as a little bit late to the party in getting into mobile and into smartphones. and, it's possible that his successor will move a lot faster and be more aggressive. >> reporter: the next c.e.o. will need to figure out how intel can catch up. he or she will also need to boost the company's struggling stock price. so far this year, the shares have lost 15%. >> this is a healthy company financially. they've got $10.5 billion in cash, $53 billion in yearly revenues. many companies would kill for these revenues.
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but, it's all about the future with technology, it's all about their growth. >> reporter: ottelini's big miss on mobile computing has made investors question intel's future. suzanne pratt, "n.b.r.," new york. >> tom: u.s. stocks staged their best single session rally in weeks. the s&p 500 was strong from the opening bell, finishing at its highest price of the session. up 2%. trading volume was 707 million shares on the big board. just under 1.8 billion on the nasdaq. fueling today's rally: the materials sector jumped 2.9%, technology bounced back 2.8%, and telecommunications was up 2.3%. a big help today was the biggest publicly traded company in the u.s.; apple. due to its size and influence in the s&p 500 and nasdaq, when apple moves, so do those indices. and today that was higher. apple jumped 7.2%, rallying more than 38 dollars per share.
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this was apple's second best single day gain this year. apple had been sinking since hitting an all time high in september. with today's gain, its down just over 19% from that record. we reported on the strong existing home sales report earlier. that helped improve the market sentiment. and home improvement retailer lowe's underscored that. the retailer earned $.40 per share, a nickel better than estimates. lowe's has been working to improve its inventory and reduce costs in its competition against home depot. this third quarter report was helped by sales of generators and other supplies thanks to super-storm sandy in the northeast. shares jumped to a new 52 week high. volume more than doubled with the stock up 6.2%. one tax set to go up in january is the tax on stock dividends. wal-mart today had an early gift for its shareholders. it moved up the payment of its fourth quarter dividend. walmart will pay out $39.75 per share on december 27. it had been scheduled to go out january second. under current law the tax on
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common dividends could go from 15% to as high as 43% for some shareholders. shares were up 1.5% on heavier than usual volume. j.p. morgan gained 2.8% before announcing a new chief financial officer late today. marianne lake currently is the chief financial officer at the bank's consumer business. the management shake-up comes after the bank's $6 billion derivatives trading loss this spring. just ahead of thanksgiving, the country's biggest meat producer tyson foods saw the impact of this summer's midwestern drought. dry conditions led to higher animal feed costs, leading to less meat supply, helping tyson raise prices. bottom line for the quarter: $.55 per share in earnings, $.11 better than estimates. that's despite tyson's revenues coming up short of forecast. shares jumped 10.9% on heavy volume. despite the sales shortfall in the past quarter, its revenue outlook for the year was more than anticipated thanks to higher product prices.
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all of the five most actively traded exchange traded products were stronger. the biggest gains came in the nasdaq 100 tracking fund, up 2.4%. and that's tonight's "market focus." >> tom: one bit of economic certainty did come out of this month's election, health care insurance reform will continue. that is tonight's word on the street mandate. debra borchardt with us. now debra, the law will require companies of a certain size to pay if they don't offer their own employees health insurance. how real are the threats of job cuts, though, that we're
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hearing? >>. >> well, we're hearing lots of companies company out and say that they are laying off workers, that they will be cutting back workers' hours so they won't have to pay them health insurance because of the mandate. but it's interesting that it is coincidentally, of course, right after the election. and then when you start to look at some of the c.e.o.s of these companies also coincidentally they were romney supporters. so you had to start to drill a little bit deeper to find out what was behind all these changes. >> tom: we've got two here where we will set aside politics and look at business fundamentals. beginning with papa johns. pzza, its owner has been a very vocal opponent of health insurance reform. the stock has sold off along with the broad market although it rallied some today saying that it could add as much as 20 cents per pizza if it were to go through with the health-care reform law. >> right, that's what the c.e.o. said. he said that he was can going to cut his employees hours back so they wouldn't be full-time employees. but when you start to dig through the company's earnings in their most recent quarter, they did have some issues with the
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company. and specifically on the cost side. they had plenty of money to pay the managers bonuses. they had money for conferences. in fact, the only costs that had actually come down for them had been the cost of cheese. everything else was up. their advertising costs were up. so you start to think well you know what, maybe they could have cut back in some other areas. also they're getting a lot of flack from the people out in the blogosphere. they say this company gives a way 2 million free pizzas, maybe they should cut that out and give their employees some insurance. >> that is part of a promotion with the nfl. another restaurant better fon nor olive garden, red lobster threatened to cut back worker hours even though its olive garden is struggling. analysts point that that is really points to the stock felloff since september. >> that's right. live garden is practically giving that pasta away. in fact, you can go and buy some pasta and get another entree for free and take it
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home forth next night. and so really, what their problems are, they haven't had a lot of growth at olive garden. and as you mentioned their other flagship restaurant red long ster, we all know the price of lobster is cheap, cheap, cheap. there is a glut of lobster so you can go to your grocery store for 4.99 a pound. i went on-line they are selling their lobster for $33. that is, you know, people know this difference. and that is why they are not going there. >> dow own any of these stocks? >> no i don't. >> tom: putting politic as side for profit, debra borchardt with the street.com. >> susie: in this holiday season americans are dropping coins into salvation army buckets and donating money to a variety of charities. but there are ways investors can contribute to their communities and make money too. it's called social or community impact investing. as diane eastabrook reports this trend is providing a financial boost to many cash-strapped neighborhoods. >> reporter: philanthropy is a way of life for university of chicago senior thomas george, guiding his career goals and
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investment choices. >> if my money isn't going to be working for something that i don't actually believe in then i'm not interested. >> reporter: last summer george bought a $500 community investment note from calvert foundation. his money is helping finance organizations like growing home. >> so these are good. >> reporter: growing home's an urban farm that puts the chronically unemployed to work producing fruits and vegetables in one of chicago's poorest neighborhoods. >> community investing is a growing trend both here and in europe. it allows investors to take a financial stake in their communities to improve housing, fight crime, and even add jobs. >> reporter: community investing works a couple of different ways. social impact bonds raise capital to achieve a social goal like keeping ex-offenders out of jail. if the program succeeds investors make money. community investment notes-- raise capital for organizations that have a revenue component. if the organization makes money, so do investors. growing home got a $50,000 loan funded by community investment
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notes to build two new hoop houses for growing vegetables. the group makes money selling produce to farmers markets and restaurants. >> we expect to be able to pay it back fairly quickly we're gonna make about next year about $30,000 in income on just what you can see there. >> reporter: calvert foundation says it only loans money to organizations with a solid track record. >> we're looking at very traditional measurements for credit quality things like liquidity, how strong an organization's operations are and how strong and long their track record has been. >> reporter: investors can buy notes online from calvert for as little as $20. investments over $1,000 can be purchased from a broker. the interest rate on a one-year note is 0.5%. it's 2% on a five-year note incapital underwrites calvert's community investment notes. chairman thomas ricketts says now that financial advisors
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understand these products are as easy to purchase as any other bond, they're recommending them to more investors. >> in certain years the interest rate would be much lower than what your alternatives were, but right now you get pretty much a market return plus the added benefit of a social return. >> reporter: community investing-- like any financial product-- carries risk. organizations might not be able to repay loans. calvert says it's loss rate is only two percent, but it has a cash cushion to assure any investor who takes a stake in his or her community gets repaid. diane eastabrook, "n.b.r.," chicago. >> susie: tomorrow diane takes a closer look at how community investment notes are helping provide jobs in one of chicago's poorest neighborhoods. you'll find more on social impact investing, on our website: www.nbr.com. just look for the "nbr-u" tab. >> susie: that's "nightly business report" for monday, november 19. and be sure to join us tomorrow, fed chairman bernanke speaks in
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new york, and tom, we'll be there covering what he says about the economy, and the fiscal cliff. >> tom: looking forward to it susie, good night everyone. we'll see you online at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org
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